~ An Aussie look at Financial markets-Been in the Biz for over 30 years!

Tuesday 15th March- Australian Market Wrap

ASX 200 drops 74.1 points to 5111.4, with broad selling across all sectors in thin pre-Fed trading conditions. Weak commodity prices hit miners and profit taking in banks added to the pressure following RBA minutes. Japan down 0.94% with China down 1%. US futures down 48 and AUD slipped to 74.90 cents.

And there we have it. The start of the pullback. An innocuous start gave way to across the board profit taking. Selling accelerated after the release of the RBA minutes showing Glenn and his buddies had turned a little more concerned about low growth and low inflation. He now seems to have opened the door slightly to the possibility of rate cuts. This should be a good thing right? Well the market took it as a vote of ‘no confidence’ in the local economy plus the AUD slipped back to 74.90. Although the minutes were not a huge issue, the market was already looking for an excuse to come off and consolidate. This was the smoking gun the traders wanted. Volume was light and the thin trading conditions allowed the sellers to step up the pressure and the buyers to wilt.

ASX 200 Index Today Aussie Dollar Today US74.89c

The fall was across the board and was led by a perfect storm in banks and resources falling away simultaneously. There were no sectors that offered a hiding place.

As well as the RBA influence, the yuan fix at 12.15pm was the weakest since January, around to 6.5079, showing the authorities’ continuing desire to incrementally shift the currency lower in a controlled measure way.

STOCKS AND SECTORS

Resources were due for a pullback given the rises they have had. Dalian Iron ore futures in China were down 4.5% not helping the big miners. BHP -3.44%, RIO -3.37% and Fortescue Metals (FMG) -1.55%. South 32 (S32) -4.55% finally gave back some of its recent gains as well as Independence Group (IGO) -2.79%, Iluka Resources (ILU) -2.48% and Alumina (AWC) -6.36%.

Energy under the cosh with falling oil prices as it once again got a little ahead of itself. Iran seems unwilling to come to the party at least until they have got production back to pre-sanction levels and then they will freeze. Russia and the Saudis have frozen at elevated levels so why can’t they? Oil Search (OSH) -3.47%, Santos (STO) -3.26% and Woodside (WPL) -3.92% and worst hit BeachEnergy (BPT) -7.89%. Coal stocks also got hit with Whitehaven Coal (WHC) -8.05% and New Hope Corporation (NHC) -4.73%.

Banks once again the swing factor and media reports about the banks losing 25% of their revenue to ‘Fintech’ upstarts did not help the situation with the sector. The report talked about over the next five years but the headlines screamed sell because they are going to lose 25%. The big four lost around 1.5% with insurers down plenty more. QBE -2.85%, IAG -1.42%, AMP -1.75% but Suncorp (SUN) -0.59% escaped the worst of it. Wealth managers slid in line with the big four. Macquarie Group (MQG) -1.44% and Magellan Financial (MFG) -1.75%, BT Investment Management (BTT) +1.62% bucked the trend following a broker upgrade

Industrials were red across the screen. Gaming stocks fell with Tatts Group (TTS) -2.41%, Aristocrat (ALL) -2.35% and Crown Resorts (CWN) -1.53%. Telstra (TLS) +0.19% has put in another positive day following the deal with San Miguel falling apart. Wesfarmers (WES) -0.55% and Woolworths (WOW) -1.34% with healthcare down and dirty too. Primary Healthcare (PRY) -4.37% and Ramsay Healthcare (RHC) -2.05%.

Media and tech stocks also in the red. REAGroup (REA) -3.04% and SouthernCrossMedia (SXL) -4.12-% and Fairfax (FXJ) -1.94%.

A bright spot in a sea of troubles was Genesis Energy (GNE) +8.4% after announcing strong demand for its bond issue in NZ. The interest rate will be 4.14% and NZ$100m has been raised.

Speculative stock of the day: Rewardle (RXH) +33.33% following a cash payment of $1.66m from the Government under the R&D scheme.

Corporate News

Asciano (AIO) +1.35% has finally recommended the all-cash offer from the new consortium of Qube Logistics (QUB) and Canada’s Brookfield. This is a massive $9.05bn cash offer and seems to have been going on for so long. A great outcome for Asciano shareholders. The bid values Asciano at 928 cents made up of 915 cents in cash and a 13 cent dividend. As a result, Qube has moved to raise money at 205 cents to raise $800m with a $494m 1:4.4 accelerated non-renounceable entitlement offer and a $306m placement to CPPIB (the Canadian Pension Plan Investment Board).

Dick Smith (DSH) has been one of the highest and most emotive corporate casualties in the last year or so and it emerged today Kogan has bought the trade mark IP and online business from the administrators for an undisclosed sum.

ECONOMIC NEWS

Everything has been on the table and it seems to have come down to this. Treasurer Scott Morrison has confirmed superannuation tax concessions will be pared back in the May budget, saying super was beginning to exceed its role as a retirement savings vehicle. Proceeds from the changes would be used to fund income tax cuts.

Consumer confidence has risen to its highest level in 14 months, with Australians more upbeat about their finances. The ANZ-Roy Morgan consumer confidence index jumped 1.4% to 116.4 in the week ending March 13th

IN ASIA

BOJ Governor Kuroda kept the target for increasing the monetary base unchanged, and left their benchmark rate at minus 0.1%. The central bank reiterated that it will add easing if necessary. Press conference to come later today. Board voted 7-2 on negative rate, 8-1 on monetary base target.

Life is a roller coaster especially in Japan.

China is also moving to curb FX speculation by putting a tax on currency transactions known as the ‘Tobin Tax’. The tax is designed to curb currency traders from speculative activity. There is a school of thought that the PBoC is moving to pre-empt any excessive volatility and making it harder for offshore raiders and hedge funds to take on the authorities.

EUROPE AND THE US

Sony has announced plans to buy out the 50% of ATV, part of Michael Jackson Music it does not own currently. The deal is worth US$750m and includes publishing rights to Sting and the Rolling Stones plus most of the Beatles songs too.

Fresh from one of the biggest hacking heists in history that even Danny Ocean would be proud of, the Bangladesh Central bank governor has said he is ready to resign. This follows a Bangladesh request to the New York Federal Reserve bank to send them a cool $1bn. The issue was that it was a fake request and the US bank only spotted it when an eagle eyed employee noticed a spelling mistake in the request and questioned the Bangladesh Bank and so rumbled the scam. They still managed to get away with US$101m before the request was stopped.